We each view reality from our own unique perspective, only a community of minds can show us the truth.

Right Wing Wacko Newsletter

After a long illness, the editor of this blog, Terry Wilken passed on July 23rd, 2014 . This was the last serious essay that Terry wrote for his beloved RWWNL, however those who knew and read Terry, also knew that he was not too serious when he was writing his essays. … I will leave the blog up for those who loved Terry.

Monday, April 23nd, 2012

MACROECONOMICS

Macroeconomics is the study of economics on a global scale. It is the study of how Nations relate to each other economically. It is probably a subject that most people would rather go bury their head in the sand than actually listen to the lecture. The most important thing to remember is that in order to grow an economy, it is necessary to devalue your currency first. If the currency in country A is valued less than the currency in country B, then the people in country B can buy those products in country A for less money. This means the producers in country A have lots of customers for their products. The devaluation of our currency has certainly been done here in the good old USA. From all the talking heads, it appears to be working, but it sure has not brought on the growth in sales and business that would be expected. One would expect with the devaluation of our currency that other countries would want to buy all of our cheap goods

The only problem with this is that all the other major countries of the World want the same thing. They would like nothing more than be the seller to the rest of the World. Everyone wants a piece of the pie. The problem is that there is not enough pie to go around. We have been trying hard to make more pie. So far we are doing a good job, but what are we really accomplishing? For one we are not creating the right kind of pie. Some Nations would like to have their own type of pie. Our kind of pie only causes them to have higher inflation. They have too many dollars and they can only buy their own currency making the value of their currency have less value. Their own currency will not buy as much as it used to and it takes a lot more to buy the same thing. Inflation is what occurs.

Economics is an interesting subject. It is either defined as microeconomics or macroeconomics. Microeconomics is the every day trade that we do. Macroeconomics is the trade that occurs between larger entities such as Nations. It involves the trade of currencies, or some medium of exchange that both countries agree to exchange as currency of the realm. This medium could be food, clothes, gold, silver, or some other commodities that both countries value.

The study of this exchange between Nations is an interesting study. It involves the exchange rate between currencies and their relationship to each other. It is nice to be the big boy on the street. For a long time and right up until now, the US has been the big boy and has had the reserve currency and has been able to call all the shots. The Chinese currency and the European currencies have been almost as strong. The Euro is divided up amongst several countries and that situation has caused quite a problem. The Chinese currency has been pegged to the US currency, so how the US goes, so goes the Chinese currency.

A great deal of effort has been put in trying to force the Chinese to change the value of their currency in order to make it more favorable to the US. The Chinese have been very reluctant to do this. They have taken baby steps in this direction, but to take a giant step would cause them to have severe inflation. That they do not want.

Mean while back at the ranch we still continue to spend money like it was not worth the paper it was written on. At some point this may become true. It is certainly of far less value than the penny or the nickel. It already costs a lot more to coin the penny and the nickel than it is worth to spend. The US government is already considering doing away with the penny so as to save us the money to have to produce the penny. I could certainly come up with a lot better idea of how to save money than this. Can anyone answer the question where saving a few million on doing away with the penny, but still spending over one trillion on things that certainly need restrained.

Well I guess that we need to start somewhere. I guess that if we eliminate the penny that everyone will start using plastic to buy everything. I do not know if the one-cent will be eliminated entirely, and if so I guess that everything will go up by a factor of a few percent. That will be nothing in the scheme of things. Maybe it will get a lot more serious when they decide to eliminate the dollar bill. By then we should be used to higher prices. This may be microeconomics, but it sure has a lot to do with the big picture.

The Obamacare Decision & the Election?

I may be going out on a limb here, but I for one think that the Supreme Court’s decision will have a big part in determining the election and the course of the economy. The nine justices are supposed to determine each case on whether or not it is constitutional, but they cannot help letting their own feelings enter into the decision. This will probably lead to a very close decision. Regardless of the outcome of the vote, the outcome of the election will probably be affected

If they agree with Obama that the mandate is legal, it will be a bad thing for Obama. Why? The base of the Republican party will be energized and will gather together to make sure that they win the election. They already are so incensed that the bill is still in place that they will do anything to make sure that it can be overturned at the next election. At the same time it will become plainly evident what the true cost of the bill will be. At the present time it is said to cost twice as much as projected at first. There are even those who say that it will cost four times as much. Who ever thought that you could add people, add benefits, and actually save money? Who would have thought that a 2700 page bill would not have a whole lot of sweet things added for those that needed some of the free money. Did any one ask the doctors what should be done?

If Obama loses and the mandate is rejected, it could be a good thing for Obama. The base of the Republican party will think that they have won, and not be so excited about overturning the election. The cost would not be a big deal. If we can spend a trillion dollars more each year than we take in than what is a few more if we get increased benefits. How many people pay attention to how much the government spends anyway. There are certainly a lot of talking heads that do not pay any attention to the amount of money being spent. They are busy determining the positive things that are going on in the economy to pay attention to the negative things.

There is certainly something wrong with a bill that must be paid for over a period of time before it takes affect. This was done in order to balance it in 10 years. The question one should ask is what will happen to the cost after 10 years”? I guess we will find out.

On another subject, has any one heard of what is happening to Spain? They are in serious financial trouble, and may need bailed out in order to survive. They are following the same path as Greece. The only problem is that they are much larger than Greece, and they cannot be bailed out so easily. The countries that are in line to bail them out are not in such good shape themselves. What do you think would happen if Germany returned to their original currency and decided that the Euro was not for them? That would be a good question.

The reason that they are in trouble is that they have been spending money that they do not have. Now where has this happened before? Now who in their right mind would do that?

OK, back on topic. We will not know what the supreme court decides until June, It is important to know that they will not only decide on whether the mandate is legal, but whether other parts of the bill are legal too. They will not go through the bill line item by line item. They will only pick out certain items. There have not been many people that have read the entire bill.

No matter what the Supreme Court decides, the main item that will affect our economy will not have been addressed. They may affect what has become a boondoggle for many and a plus for others, but will not address the deficits that we will see for years to come. They cannot address the fact that if H gets elected again, that we will end up a different country. It will not be recognizable. The Supreme Court cannot do anything to help us. They can only help us solve bad law. Let us hope that they do the right thing and make the congress and senate start over and do things right for a change.

The Three Legged Stool!

Last week we saw the plans that would lead us to the Promised Land. Now it is important to learn how to get the plans in place. This is very simple, but probably will not happen either. It will require that people vote in the next election, and that they vote for candidates that believe in the solution. That is a tall order. It is too easy to vote for the tried and true. It is very hard for voters to vote for candidates that they think will take away their Medicare, Medicaid, pensions, or the government largess that they have grown to love.

They not only have to vote out their favorite Senator and Congressman, but to vote for a Presidential candidate that they do not personally like. They must keep the ones that have shown us the character to vote against the norm, and reject the ones that give them everything that they think they need.

W and H have both let the budget grow during their Presidencies. They both said they were doing the right thing for us, and that spending more money than we took in was important. It was necessary to do the things that we wanted to do. The thing that they did not understand was that it was not their job to do the things that they thought we wanted them to do. Their job is to do the things that are right, even if it will make us unhappy. I can certainly see why it would be hard to vote for someone like that.

It is important that we reign in government spending. This is Job 1. It is vital if we are to survive. The current road that we are heading down is the yellow brick road. We all know where that led us. It leads us to the land of OZ and the wizard behind the green door. The wizard is pulling all the levers that make us think that he knows what he is doing. We must realize that he is only pulling the levers that make us think that he is doing the right thing. If we think that all is right with the world and that we cannot survive without him, than he is pulling the right levers. It is time to replace the lever pullers.

It is time to eliminate the wizard’s that have brought us to this point. That is a big task and we do not have a lot of time to get this situation corrected. If we do not make the right decisions this election cycle, than we may not get another chance to make a change that will correct the course that we are on.

We are on a course to bankrupt the United States of America. The government cannot continue to spend over a trillion dollars more each year than is provided by the US taxpayer. There is not a bankruptcy court large enough to right the ship of this county if we become bankrupt. Those are clear and obvious conclusions. It is hard to understand that there are those who do not see that we are headed towards a problem. They cannot read the handwriting on the wall, or they choose to hold out hope that we can survive this. That is definitely false hope. What is going on would not work for a family, and certainly will not work for our government. It is time to change the direction that we are going.

For those that are paying attention, it is obvious the deficits are having an affect on our economy. If you buy food or gasoline for your car, you may have noticed an increase in price. Part of this is due to the inflation that has been built into the cost stream. Corn, which is involved in the cost of food and energy, has seen a major cost increase. This is partly due to the same problem. In order to pay off the National Debt, the government needs to inflate the currency, and pay off the debt with a devalued dollar. They see inflation as necessary to their survival.

We are also seeing signs of interest rate increases. The Fed is doing everything in their power to keep this from happening, but at some point they will be overwhelmed. The bankers that comprise the Fed have a lot of money, and if they need more than they can request another bailout from the government. This will have dire consequences. They do not have enough money to keep this balloon under water much longer. There are market forces that are stronger than you may think that will force them into a lose-lose proposition. It is time to do something other than go on the campaign trail.

It is coming up on election season, and it may be the most important election in your lifetime. The decision that you make may not be one that you would make in normal times, but this is not normal times. It is time to look at the real positions of the candidate, and not whether they are likeable or not. Next week’s issue will be an examination of the economics of Obama care, and how the Supreme Court’s decision on Obama care may affect the election and our economy.

Plans Are On The Table

I put my plan on the table last week. Paul Ryan has put his plan for budget changes before congress. Now we await the decision on what will be done. It is amazing that some of my ideas were put into the budget that Paul Ryan put forth. Could it be said that I was on the right track? That would certainly be a first. My changes were only put forth in a newsletter on the Internet. Paul’s budget must be passed by both congressional powers and signed by the President of the United States. He certainly has a much harder journey.

Paul Ryan came to the conclusion that we could no longer spend more each year than is taken in. He put a plan on the table. Based on the amount of overspending being done, he had to make some severe cuts to the budget as well as making changes on the revenue side. It included reductions in the ability to take offsets to the amount of tax owed, and a reduction in the tax rates. It would cause significant changes to the way Washington has been doing business.

The first hurdle is to get the budget passed by the House. This is on its way to being done. I think it will get by the house. The next hurdle is the senate. I doubt that it will have a chance there since the senate has not voted on a meaningful bill in quite some time. Many of them are in the same political party as H is, and they are also on the campaign trail. This has caused them to be very wary of voting on anything, as it would cause them to take sides with the issue at hand. No bill that reduces spending has taken place in the senate in quite a while. Let us not break such a record.

Normally when a bill is placed in one chamber of the government it is voted on in the other chamber. If it passes than it is reconciled by a combination of the congressional sides of government. Here is where the details are worked out, and if parts of the bill are not liked by some than they can argue over these parts and come to a reconciliation of the bill. After this has occurred than it can be passed on for the signature of the President. The President would never sign such a bill, as he does not believe that cutting spending is the way out of our debt problem.

The bill seems dead upon arrival. Where does this leave us? If we do not start to control entitlement spending and eliminate the tax deductions for everyone including the rich than I guess that we are headed for a European lifestyle. I do not think that we would like that.

There are those that do not think that government deficits or their debt is a bad thing. They are the same people who believe that all we need to do is to pass more regulations or to spend money on the projects that they feel will save the economy. If we want to solve the debt problem than all we have to do is tax the rich. That is the answer. If the rich were paying their fair share, than all would be right with the World.

Higher taxes for the rich might be part of the solution, but only if it comes with significant spending reductions. Tax increases alone will not solve the problem. Many ask why one side of the thinking is so opposed to tax increases. The reason is that tax increases have only provided a cushion to all for more spending in the past. If the side calling for more taxes cut spending first, than they might have more luck getting higher taxes from the rich in order to balance the budget.

If the budget ever gets balanced, than it will become necessary to come up with a system to maintain this equilibrium. This might require a balanced budget amendment to the constitution, or to eliminate the supplier of the money that is necessary to continue the deficits, or to control the increase in the money supple through some method. A gold standard, or some other mechanism might be the answer to this. We need to start with a balanced budget first. The rest can follow.

Changes Required?

Changes to the way we do things in Washington need to be made. There are very important reasons for this. If we do not get our house in order, it will not be possible to get others in the World to listen to us. If we are to have an economic recovery, it will be necessary for the government to quit spending money in a very inefficient manner. Changes are important to eliminating the deficits. The following needs to be done.

1- Cut out all earmarks to legislative bills. I realize that this is not much money, but it has not given the individual legislatures an awareness that this money is not there’s, and they need to be frugal with it. This even includes the President. It allows them the ability to either buy votes or pay off friends.

2- Freeze all spending at current levels.

3- Revise all department budgets to balance the individual budgets, or eliminate departments until the total budget is balanced. This would require that a budget be established. If it cannot be done immediately, than establish a deadline!

4- Change the entitlement program to balanced condition or return the programs to the states and give them the money being used.

5- Eliminate the FED. I have discussed this before. It would take the money that they spend away from them that is in excess of tax receipts.

6- Eliminate all tax breaks. This should include both personal and business tax breaks. Business of course could take deductions for their normal business expenses.

7- Revise tax code. Following item 6, this should result in lower rates for both personal and corporate taxes. A minimum tax should be established so that everyone has some skin in the game.

8- Pass a balanced budget amendment. It can allow a certain percentage over GDP, but beyond that would require that congress be immediately subject to a new election or some other penalty.

The above recommendations may not be everything that needs done, but it would sure be a good start. No matter what bills are passed, members of the government should be required to fall under the same rules.

The above may be considered to be a hard job to get accomplished, but that is why they get paid the big bucks. They made the decision to take this job. If you take a job than it behooves you to get the job done. The rules may not all have to be accomplished at once. A balanced budget amendment would not be necessary if they pass a balanced budget each year. The object would be for the congress to budget within the limits of the income.

They are now just printing money to buy the things that they cannot afford at this time. When you create more and more of any item, you reduce its value. Our dollar is being devalued. This is already occurring. Our currency has been the de facto reserve currency, which has been a good thing for the purchase of oil. That is now changing.

There may be things that are important to have now, but if this is the case, than we need to cut somewhere else.

Reducing the value of the dollar also makes everyone’s assets worth less than what they paid. The asset may be more costly now, but the dollar that you use today does not have the same value that it had when you bought the asset. With the price of houses falling, this now adds another hit to the economy. It hurts those on a fixed income like those on social security.

It is important that one see that decisions that are made may have unintended consequences. We formed social security and Medicare years ago, and now it may become unaffordable. Have you heard these words before? “Even if we drilled there, it would still take 10 years to bring it to market”. Does this make it not worth getting started? Well, it has been 10 years, and we have not even started yet. This would not have cost much then, and would sure be helping the gas cost at this time. The same can be said for our debt and entitlements. We need to get started on elimination and reductions.

Spending more money on anything does not always make it better. It is important that both the people and the government grow to understand this. Will it happen? I do not think it will. That is the sad side of where we will be in 30 years.

Energy Again!

San Jose and San Diego California are heading for bankruptcy, unless they are able to come to their senses. This will be hard to make happen. Interest rates are starting to inch up. The debt clock may need oiling. … But, with all the problems in our economy, it is time to change our focus to solutions rather than our problems.

My focus today will be how to resolve our problem with rising gasoline prices. I presented some solutions for this problem in the last newsletter, but I think that it is time to expand on that.

H has told us that we are drilling more now than ever before. This is true. The only problem is that it is done on private land and not on any public land. The states where this drilling is occurring have very low unemployment rates. The unemployment rate here in Oklahoma is 6.1 percent. New businesses are starting up to convert trucks and vans to compressed natural gas. Oklahoma is now finding more natural gas than they ever thought was here.

The unemployment rate in North Dakota is at just a little over 2 percent. This is due to the Bakken shale formation being in their state. Some McDonald’s stores are currently paying their employees $15 per hour in order to attract workers. Yes the Bakken shale formation is the same one found in Canada, which is the source of oil that they would like to sell to the United States. I guess the environmental protection agency has a lot more to say about where we will get our oil.

We have already sent our deep water drilling rigs to the shores of Brazil. This was done by not letting them drill here. Now we have agreed to buy oil from Brazil. We have even given them taxpayer money. That does not make sense. I guess Brazil has a much friendlier government to work with than Canada. To get their oil will take transport by tanker on the oceans. I sure hope that they do not have a spill or leak into the oceans. That might cause an environmental problem. Maybe we should build a pipeline from Brazil to Texas so that we can take advantage of lower transportation costs. We need to do an environmental study on that. You need to check the price of diesel also. That is the energy that trucks use to bring products to market here in the US. It is only made at a few select refineries in this country.

Speaking of refineries, have you heard that many of these plants are up for sale or being shut down? You can read about it here, here, and here.

There are also refineries that have been dismantled and shipped overseas so that they could refine the components of oil there instead of here. This is due to the EPA we have all grown to know and love. They are making decisions to keep us safe and prevent us from being poisoned. I guess that some parents think that drinking gasoline is not good for their children’s health. Of course if we want any gasoline or other products from the moved refineries we will have to transport these products back to the US by tanker.

The refineries that are being closed down are concentrated in the Northeast. The primary reason given for these closures is that the price of oil that they are refining is now much more expensive that the price of oil in the US. It is important to note that they are getting their oil from other countries. They are not buying it here. It is imported oil. The higher cost of oil makes the products that are refined more expensive. That means that dealers will buy the refined product from other refineries here in the US and pay the transportation costs, or import the refined product from overseas.

It is also becoming expensive to process oil due to EPA regulations. Major changes to the plants will be required, or the cost to refurbish parts of the plants will be expensive. These plants are not growing old gracefully.

Here is another take on what is currently happening in the Oil market. Warning! This article is not very friendly to the current administration. The use of the current administration statistics to demonstrate that we are in good shape in the oil industry is debunked by what is said in this article.

One other debunking that I would like to do is that all we have to do is to go after the speculators. This would be a major mistake. The system is the one that has kept prices in a workable range despite all the governments that have to work within the system. Our prices are currently more stable than in other countries. I can assure you that we do not want a government system of pricing.

It is time for the government to get out of being in control of the energy business. They have already demonstrated that they are n0t very capable of managing businesses, deficits or currencies of any type. The real test of the price of gasoline and oil will be when or if Israel bombs Iran. Will this wake our government up? I doubt it! After all, it is time for another election. They are crucial you know.

Not Much To Say

As we continue down the same road, I continue to hear that things are getting better. This is the same old story that we have heard before. If only we would invest more money, we would be in a better position to grow America. The offered solution is always to spend more rather than it is time to cut spending.

This creates our present reality of spending three billion dollars a day more than we take in. And, this is only on the government side of the ledger. Luckily we are a rich enough country so that we still have a little time left to change what we are doing. However, time is short and we are very close to the precipice.

H is even talking about another stimulus to get us going at a faster clip. It is clear that he does not have a clue. If I were an executive of any kind of manufacturing plant, the last thing I would do is invite the president to visit my place of business.. A lot of the businesses that he has visited have gone bankrupt, and the products that he was touting have not done well either.

Have you heard of Solyndra or the Volt? Both have been a disaster. His idea is to spend even more of the government’s money on these ideas. It is really our money or our grandchildren’s money, so I guess we should not really worry about it. It will not be our problem. Maybe we have enough time left to leave the problem to our children and grandchildren. That certainly makes the most sense. We should be able to spend all we want after all, and if we are broke or do not have a job; we will just make it the government’s problem.

I wish things were that simple. We have made a decision to print all the money that we want to spend, and we will worry about the consequences later. There has not even been anyone that can bring the congress to its senses. There have been those that have tried, but they we not able to get the entire congress to realize that we should be concerned about the debt or the deficit that we are running.

We have added more jobs to the economy the past reporting period, but there are a lot of people looking for a job, or decided to drop out of the labor pool altogether. I guess some of them have even decided that the government has some good plans to take care of them. I guess that if you do not have a good alternative, than that is the only option left.

Prices are still going up, and it does not look like it will get any better. It is getting more expensive at the grocery store to buy anything. Most of the manufactures of food have used up all their tricks to save money or to make a product cheaper. They have managed to put products in smaller cans, jars, or boxes, but there is a limit as to what they can do. They have even lowered their profit level in an attempt to keep prices low.

We have even seen fuel prices go up. In case you have not noticed, the price of gasoline has doubled in the past year. There is an easy fix to this dilemma, we could let the Canadians furnish the oil and all we would have to do is build a pipeline to get the oil to our refineries. That would sure be a good start. The next step would allow opening up areas to allow drilling. This would create oil to start on the road to make us self-sufficient. The final step would be to permit another major complex refinery. This is the most important step, as we have not built a new major refinery since 1977. I think that we have grown somewhat since then.

These ideas would go a long way to help lower gasoline prices. Just the announcement that we were looking at these ideas would help to lower futures prices. Green energy is not the answer to our current problem. Spending more money on green energy right now does not make sense. You might as well burn the money in your fireplace to keep warm. Green energy will be the answer to our energy needs in the future, but we have more important problems to address at this time. All the congressional investigations that could be thought of, could not help us with this problem